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Ma107 2020

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11 views3 pages

Ma107 2020

Uploaded by

kathleenzsy0227
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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January 2020 Exam

MA107
Quantitative Methods (Mathematics)

Suitable for all candidates

Instructions to candidates

This paper contains 4 questions. Your answers to all 4 questions will count towards the final mark.
All questions carry an equal number of marks.
Answers should be justified by showing work.
Please write your answers in dark ink (black or blue) only.

Time Allowed Reading Time: None


Writing Time: 2 hours

You are supplied with: No additional materials

You may also use: No additional materials

Calculators: Calculators are not allowed in this exam

© LSE LT 2020/MA107 Page 1 of 3


Question 1
(a) Suppose that p and q are related by the equations

p = −q 2 − 2q + 8 and p = 2q + 3.

(i) Find the points of intersection of the curves represented by these equations.
Sketch these curves for (p, q) ∈ R2 .
In a market, these equations represent supply and demand.
(ii) Identify the supply equation and the demand equation.
Indicate, on your sketch from part (i), where the curves are economically meaningful.
Write down the equilibrium set for this market.
(b) Minouche invests $1000 at an interest rate of 5% per annum at the start of 2019. She wants to
withdraw a fixed amount $I at the end of each year for the next 12 years.
(i) Model this situation using a recurrence equation and find the value of her investment after
n years have elapsed.
(ii) Given that 1.0512 is approximately 1.8, what is the corresponding maximum value of I ?

Question 2
(a) A monopoly has a cost function given by

C(q) = 2 − 4q + 7q 2 − q 3

and the demand for its product is given by the equation

p + 2q = 20.

For what values of q is the demand equation economically meaningful?


What is the profit function π(q) for this monopoly?
Find and classify the stationary points of π(q).
What value of q will maximise π(q)?
(b) Use row operations to determine the values of k for which the system of equations

x + y + z = 2,
x + 2y + 2z = 3,
2x + 3y + kz = 5,

has a solution.
Hence, for these values of k , find the solution to this system of equations and express your
answer in vector form.

© LSE LT 2020/MA107 Page 2 of 3


Question 3
(a) Find and classify the stationary points of the function

f (x, y) = 2x3 − 3x2 − 12x + y 2 + 6y − 7.

(b) Two consumers, Anne and Brian, have $10 each to spend on cats and dogs. A cat costs $2 and
a dog costs $1.
(i) If x is the number of cats and y is the number of dogs, sketch the budget set for these
consumers.
(ii) Anne has a utility function given by

uA (x, y) = x2 + y 2 .

Sketch a few of Anne’s indifference curves and indicate the bundle (x, y) of cats and dogs
which will maximise her utility subject to her budget constraint. What is this bundle?
(iii) Brian has a utility function given by

uB (x, y) = x2 y 3 .

Sketch a few of Brian’s indifference curves and indicate the bundle (x, y) of cats and dogs
which will maximise his utility subject to his budget constraint.
Why can we use the method of Lagrange multipliers to find this bundle?
Use the method of Lagrange multipliers to find this bundle.

Question 4
(a) Find the function f (x) that satisfies the differential equation

df f (x) 1
− =
dx x + 1 x−2
and the initial condition f (0) = 0.
(b) Suppose consumers anticipate market trends according to the demand function

q D (p(t)) = 7 − 2p(t) − 2p0 (t) + p00 (t)

and the supply function is q S (p) = p − 2.


Write down the condition for equilibrium and find p(t) given that p(0) = 1 and p0 (0) = 2.
Describe the behaviour of p(t) as t increases.

END OF PAPER

© LSE LT 2020/MA107 Page 3 of 3

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